We've all seen those sitcoms where a character walks into his accountant's office the day before April 15, lugging a big box with all the receipts he's collected over the calendar year. As a general rule, even if you run your own business, you don't need to keep the receipts for $5 Starbucks lattes you've bought for clients—there's not an IRS revenue officer in the world who wants you to itemize such purchases dollar by dollar. But you do need to keep track of your major outlays, lest you land in serious trouble with the feds.
What Types of Expenses Should You Document?
If you are making major deductions on your corporate or personal tax return, the IRS may well audit your return and ask to see paper evidence (i.e., printed or electronic receipts)backing up these purchases. This applies to:
- Business trips. You should supply receipts for your airline tickets, hotel room, entertaining expenses, etc.
- Office equipment. Did you buy yourself a state-of-the-art, $2,000 laptop for your home business? Keep that receipt handy.
- Donations to charity. If you're in a tax bracket where a $5,000 donation lightens your return, you will need to supply proof to the IRS.
- Medical insurance. Some payments are deductible, and some aren't, depending on your employment status. You need to keep accurate records.
- Office space. You can't simply claim to rent an outside office and deduct that amount from your return; you need to supply proof of an actual lease.
Many Oklahoma taxpayers make the mistake of claiming huge, made-up deductions on their tax return, on the mistaken premise that the IRS will consider them “small change” and concentrate its collection efforts on wealthier citizens. But, if your expenses and deductions are completely out of whack with your type of business or tax bracket, you may wind up being audited.
Need Advice on Deductions? Contact Travis W. Watkins, PC
At Travis W. Watkins, PC, our Oklahoma tax experts can advise you about your yearly tax deductions, and which ones are liable to trigger an IRS audit (or, worse, a notice for payment of back taxes).
Questions? Call us today at 800-721-7054 to learn what we can do for you!